The
amazing thing about the Internet, from a pure business
standpoint, is how a startup company can sprout from an idea
scribbled on a notepad into an industry giant in a spectacularly
short period of time. In January 2000, Sedo was a dream that
had just been hatched by German college students Tim Schumacher,
Ulrich Priesner and Marius Wuerzner.

Schumacher
had just completed his Master’s Degree thesis at the University
of Cologne on “Price Formation in the Trade of Internet
Domain Names”. Close pal Priesner was a tech whiz kid who
programmed the original Sedo site and serves as the company’s Chief
Technical Officer today. Wuerzner, the current head of Sedo's
Escrow/Transfer team, was anotherlongtime friend who completed a founding partnership that
wasted no time in making waves.

The
trio set up shop in Cologne just as a red hot domain market was
cooling off and on its way to cratering in a spectacular industry
wide crash. Considering that they not only survived but thrived in
that environment tells you a lot about the competitive drive they
were about to unleash on the global marketplace. The name Sedo was
chosen as an acronym for Search Engine for Domain Offers. The
idea was to consolidate the highly fragmented marketplace for
“used” domain names under one roof. Sedo installed a robust
meta-search engine and initiated the industry’s first
offer/counteroffer system, which allowed buyers and sellers to
negotiate directly rather than deal with the uncertainties of an
auction system. The idea and the way they applied it worked. While
older, more established competitors were closing their doors, Sedo
kept expanding. Over the last 3 years they have enjoyed an annual
growth rate of over 50%!

In February
2001, barely a year after opening their doors, Sedo gained a
valuable strategic partner and investor when Europe’s top web
hosting company, 1&1 Internet AG, took a 41% stake in the
business. By that summer, the extra capital had allowed Sedo to
quickly expand throughout Europe by introducing localized sites for
the UK, Spain and France. A year later a U.S.
site went online and the company’s global presence has continued
to grow ever since, now reaching all the way to Mainland China
where their listings are seen in the local language

The
Sedo management team got a key addition in mid-2002 when American Matthew
Bentley came on board to head operations in English language
markets. The Stanford University graduate had been in the
thick of the Silicon Valley action during the late 90’s
internet boom. Bentley told Domain Name Journal, “I
reveled in over-exuberance, stock options, and “revolutionary”
new ideas!" Bentley recalled, “the place was so rich with
entrepreneurs you used to have to sign non-disclosure agreements
just to carry on a conversation at many Stanford parties! I remember
attending a thesis presentation by two geeky grad students about a
new way of organizing data on the Internet which they were going to
call “Google.” Having that early front row seat on
web history helped Sedo strike a key partnership with Google this
year.

Matthew S. BentleyCEO, Sedo.com LLCAt Sedo's new Boston office

Bentley’s
personal web journey began with some ill-fated web design efforts a
decade ago. “I was thrilled about this new HTML technology that
would let me fill virtual canvases with blinking text, swirling
background images, and clear-pixel gifs! Later it evolved into
sending corporate logos bouncing around the screen and igniting menu
items in a holy glow through JavaScript rollovers.” Bentley said
“My pièce de résistance was a splash page for a
consulting company called Global Brain, Inc. that
dramatically floated an image of the Earth into the corner of your
screen, then illuminated a giant glowing text proclaiming, “THE
GLOBAL BRAIN AWAKENS!”. This was in a very early version of
DHTML, so about half the time the Earth would end in a fiery
collision with the text!”

Bentley
added, “fortunately for the dial-up users of the world, I quickly
realized that web design was not my calling and moved into the
business side of the Internet world. I worked at three non-profit
Internet organizations (of course many companies were “non
profit” but these were non-profit on purpose!), a now-defunct B2B
marketplace focused on advertising called MediaBid.com and
also spent a year at a product development consulting firm. When the
bubble burst, I took the opportunity to follow another passion, and
moved overseas to Europe. There I obtained a Master’s Degree in
International Business from the Euromed Graduate School of
Business in Marseille, France.”

While
he was in Europe, Bentley crossed paths with the Sedo founders and
accepted an offer to come and work with them. “When I arrived at
Sedo, our international operations were essentially non-existent. My
job was to develop our tiny English operations while competing with
the behemoths of the day, Afternic and GreatDomains,
with their tremendous corporate support and established brand image.
The amazing thing is that it actually worked!”

Bentley
recalled, “At the time, very few people had even heard of Sedo.
The first thing I read about us on a forum was “Well, I don’t
think they are a scam site!” Not exactly a ringing endorsement,
but it could have been worse! “Most people thought we were only
for Europeans, so we began an aggressive campaign to win hearts and
minds. Every customer query was treated as if they were our only
customer and they pretty much were!,” Bentley laughed.

“We
became personal consultants for many people just getting started in
the domain industry. For example, we developed domain appraisals
that were (and still are) 5-10 pages long and chock full of analysis
and advice when our competitors were charging twice as much just for
a number.” Bentley said “Let me give you an example. For one
$39 appraisal of a .jp domain I called on consultants
specializing in the tech industry in Japan, contacted
Stanford friends working in the industry in Japan and compiled
research on the growth of the new TLD!”

“Mainly
we just listened to customers,” Bentley said. “What we heard was
that there were a lot of domainers out there that were unhappy with
the current state of the domain market and their options for selling
their domains. They didn’t like the uncertainty of auctions, the
scams prevalent on Afternic (Editor’s Note: Afternic is
under different ownership today), or the unrealistic prices on
GreatDomains and they hated the poor service from pretty much
everywhere.”

Bentley
continued, “So we built our site around what our users were
asking for. Instead of auctions, we let them negotiate directly with
a buyer or seller (today they can even send messages back and
forth). To eliminate the scams and risk of domain transfers, we
trained a team of transfer experts to assist people in their
transfer from beginning to end. And we focused on answering every
customer support mail in as short a time as possible—often this
would mean management like Daniel Law and I working late
nights and weekends just to get through all of the hundreds of
customer service emails we received each day.”

Daniel
Law is another American whose path to Sedo’s executive suite
was even more circuitous than Bentley’s had been. Before
going to college, Law had spent four years as an infantryman
in the U.S. Army. Most of that time he was stationed
overseas, including a 6-month stint as a UN peacekeeper
during the third Balkan War (1992-1995). Law told
us, “that experience gave me a real appreciation for the
necessity of communication and exchange of ideas and views
between cultures!”

Daniel LawHead of U.S./UK Operations

When
his tour of duty ended, Law headed to New York City to enroll
at Columbia University where he studied Economics and
Political Science. “I loved the diversity that New York offered.
It was there that I truly gained an insight to the economic and
social impact of the internet, particularly within the context of
Globalization, a major focus of my dual studies.” Law told us
“I decided that I wanted to be a part of this world changing
dynamic so when I was offered the opportunity to go to Germany
and work at the “heart” of the internet for a company with truly
international clients and perspectives, I jumped at the chance and
left for Cologne within days of finishing my degree.”

Law,
who remains based in Cologne, was recently promoted to head up U.S.
and UK operations for Sedo, a position Bentley vacated to become the
CEO of Sedo.com LLC, the corporate entity the company
just set up in a brand spanking new American office that opened in Boston
April 1st. “I was fortunate enough to be a part of the Sedo
US\UK team in its infancy and to have had a hand in forming it into
the global marketplace it is today”, Law said.

“When
I first arrived Matt was alone and drowning in work trying to make
Sedo US\UK into a big part of Sedo’s business,” Law recalled.
“I immediately recognized the goldmine that Sedo had struck in
finding and hiring Matt and put all my efforts into supporting him
and helping him develop and realize his ideas. With lots of hard
work and many long hours we developed a customer oriented business
model and turned our department into a real market force. We were
rewarded with phenomenal growth and now employ 10 people in the
US\UK department alone. With Matt’s promotion and move to Boston,
I will primarily manage the Cologne office, support Matt’s efforts
and expansion in the US, and hopefully expand the UK side of our
business in a parallel manner.”

Tim
Schumacher remains the top executive in the Sedo hierarchy and he is
almost always on the go, traveling wherever necessary to spread the
Sedo gospel and open up new business opportunities. The countless
miles covered by he and his teammates has resulted in a network of
localized sites that include Sedo.com, Sedo.us, Sedo.co.uk,
Sedo.de, Sedo.fr, Sedo.ca, Sedo.dk, Sedo.it, Sedo.nl and
Sedo.se. The entire site is translated into four languages
(English, French, Spanish and German), with a front page in 10
languages. Matthew Bentley told us “This international diversity
is reflected in our staff—at last count I think we represented 10
nationalities and over a dozen languages—and this in a relatively
small company (around 35 but growing fast!). It makes for a very
stimulating work environment (by the way, if this sounds good to
your readers, we are hiring!).”

The
biggest international step of all was opening that new base of
operations in America. Bentley said “Opening the Boston office is
a very big investment for Sedo, but it’s something that a lot of
our users have asked for. Customers have told us they would like
better telephone access to customer service, faster bank transfers
and a site that’s better adapted to the needs of our North
American users. The only way to meet these customer requests was to
open an office in the US, so that’s what we did.”

Bentley
added, “Our model has been extremely successful in Europe, but
without a physical presence in a country, it’s difficult to get
the press, potential partners—even some customers—to take you
seriously. Over the next few months we’d like to have domainers
hear nothing but “Sedo, Sedo, Sedo”. We’re not just going to
sit on our laurels and answer customer queries—this is an
opportunity for us to see if we can recreate here some of our
accomplishments in Europe: namely, increasing awareness of the
domain secondary market among the broader Internet community,
increasing acceptance of the new TLDs, and most of all, helping
domain registrars offer integrated primary and secondary market
(“new and used”) domain names.

“I
realize that this represents a considerable challenge for a newcomer
on the scene,” Bentley said, “but we’re prepared to invest
significantly to do what it takes. We’ve already shown that
willingness to invest in doing things right by purchasing Sedo.com
for $80,000. Our lack of a .com domain has been a challenge
for us since the very beginning, One of the first things I said when
I joined the company was, “What! You want to do business in the
U.S.
with a .co.uk domain name?!!” Acquiring the .us
helped some, but most people in the U.S. still don’t respect you
without a .com. We actually had a major domain registrar tell us
that they would not consider partnering with us because we did not
have a .com! So much for supporting the new TLDs, which they were
actually one of the largest registrars of!”

Landing
Sedo.com proved to be a grueling marathon for Bentley. “When I
tried to begin negotiations for the domain, the seller would hang up
the phone every time I tried to explain that $1 million was
unreasonable! The owner knew nothing of the domain market and
current domain valuations; he just had the dumb luck to have the
same last name as a company founded some place far, far away,”
Bentley said. “For two years we tried nearly everything to bring
the guy to his senses. We offered to fly him to Cologne so that he
could see first-hand that we were not a huge multinational company,
to buy him a BMW, to send his whole family to Hawaii,
to pay him an increasing annuity for the rest of his life, etc.
Apparently, his girlfriend eventually told him he was a fool for
rejecting all of these great offers and Tim finally closed the
agreement at $80,000 (I hope the IRS is paying attention)!”

Bentley
added, “In the end I think we showed that a company can indeed be
successful developing on a .us domain name. However, this created a
slew of complications and challenges that we as a growing company
could have done without. In the end, we put our money where our
mouth is and paid the price. We feel that it’s an investment that
will eventually pay for itself many times over. And, of course, it
paved the way for the opening up of our U.S. office.”

With
respect to the company's new physical presence in America, Bentley
noted, “the immediate impact for our users will be improved
customer service, much faster domain transfers and bank transfers, more
payment options and improved usability. On a longer-term scale,
they should see Sedo investing heavily in marketing and product
improvements. I will make it very clear right now: the secondary
market needs a single dominant player to bring everyone together, to
become the eBay of domain names, and we will be doing
whatever it takes to become that dominant player!”

That’s
not good news for competitors, but domain owners will appreciate the
scope of Sedo’s ambitions. “Another important focus will be
education," Bentley said. “We’d like to put out a lot of
articles in the press about the domain secondary market. We’d like
to help domainers make the most money from their investment and even
bring them together for seminars and conferences. It will be a fun
time for everyone involved in domain names and the spill-over
benefits of our marketing investment should help increase general
awareness and—along with that—domain prices.”

Bentley
told us there is currently a critical race underway among the major
players in the domain market. He said “the race is to become the
first to unify the domain primary and secondary markets. This is the
key to bringing premium domains to the general population and it
will allow domainers to offer their wares through the best possible
channel: major registrars. Sedo has already pretty much locked up
the European markets, which is why we have so many strong sales
there. We’re partnered with top registrars in Germany, the UK,
France, and Spain. Recently we closed a partnership with the leading
domain registrar in China.”

Even
so, Bentley realizes the competition isn’t sitting still. “The
other players have been very active. Verisign/GreatDomains
developed their Secondary Market Program, which would have
used their clout in the industry to force domainers to pay $60 per
domain name every 3 months just to list for sale! Fortunately, no
registrars have bought into the program. The new Afternic
has a great bunch of guys leading it, and they’ve done a lot to
throw off the ghosts of Afternic’s past, so they can’t be
counted out either. It will be a close race, but we are determined
to offer registrars a seamlessly integrated, easy way for their
users to access premium domains. Most importantly, we’re offering
them a way to boost badly needed revenue in these tough times,”
Bentley said.

He
added, ”We have a lot of other ideas, many contributed by
customers in a recent survey we did, and we recently nearly doubled
the size of our tech development team, so we’ll finally have the
tools to put all of these great ideas in place.” Bentley said
those expenditures will pay off in a big way for Sedo customers.
“From the comfort of their couch they can use Sedo to market their
domains around the world, where that new TLD, odd country code, or
meaningless phrase might suddenly take on new value.” That global
reach is a good explanation for Sedo’s dominance in country code
and new extension sales.

One
of the few areas that Sedo customers have seen glitches is in their
relatively new domain parking program. There have been some
technical problems (like a 15-hour server outage the first weekend
in April) and broad fluctuations in payouts. We asked Bentley to
address that. “Improving our parking program is the primary focus
of our Technical Development team,” he said. “I think many users
see so much volatility because we are constantly tweaking the
system, trying to improve the users’ earnings. The biggest
improvement that we have made recently was partnering with Google
AdWords to provide our advertisements.”

Bentley
added, “Currently, we’re focusing our parking attention on
improving optimization (selection of the advertising keyword) and
statistics. Both of these challenges are compounded because of the
international character of the Internet. Since Google targets their
advertisements based upon the geographic region of the visitor, a
keyword might work great for one visitor but not have any results
for the next. Similarly, the same keyword might pay $.10 for one
click and $.50 for the next. So the challenge for us is to generate
multiple keywords for each major language area, and display the
right one at the right time. It’s a pretty big technical
challenge, especially across hundreds of thousands of domain names,
but we are making good progress,” Bentley said.

Bentley
believes that domain parking should be a key component of every
domain investor’s strategy. “It’s like investing in a
stock,” he said. "You receive a regular dividend (the parking
earnings) but also have the chance for a big payoff at the end when
you sell your domain/ stock. Parking your domain is without question
the #1 thing that you can do to improve your chances of selling your
domain name. However, if you only park but don’t sell, you’re
missing out on the chance to trade in your existing assets (remember
the stock analogy) for one that might have a more lucrative
payout.”

Bentley
continued, “through our domain parking program (http://www.sedoparking.com),
suddenly even Joe DomainHolder could earn enough from his traffic to
pay for his domain registration costs (thus eliminating the downside
risk of domain speculation) and those with good names could earn
much, much more! Sedo is first and foremost a domain marketplace. We
offer domain parking to help users increase their chances of making
a sale. That’s why we’re willing to be more aggressive with our
payouts than other parking programs, because we know that if you
park with us, you have a much better chance of selling your domain
name,” he concluded.

The
domain market is currently enjoying a strong rebound, one that
Bentley thinks will continue for some time. “If you consider the
number of Internet users currently online worldwide, versus what the
number is projected to be 5-10 years from now, you realize that
demand will continue to grow. Companies will always need a good
domain for their website. That is a constant. What might change is
the definition of a good domain,” Bentley said. “Today that
might be a .com, but tomorrow it might be a .info or a few
country code TLDs.”

Bentley
also said “I believe that much of the recent growth in the
industry has come from increasing recognition of the value of
traffic. Traffic is the lifeblood of the web and domain names are
the vessels that channel that traffic to the websites that need it
to survive. From this perspective, the domain community is at the
center of the action! As more and more eMarketing professionals
recognize the untapped traffic-generating potential of domain names,
they will continue to divert their budgets away from less-effective
methods such as banner advertising and print and towards investing
in domain names. At least, that’s what we’re telling them to
do!”

Of
course a wise businessman will also keep an eye out for any
potential downside. Bentley said “I think the most significant
risk to the current growth is that the market still does not behave
like a mature market. There is little agreement on the true value of
domain names—you still see some people asking 7 figures for
worthless domain names, and others going for less than they would
generate in 1 month parked at Sedo!”

He
added, “both domain sellers and buyers (the general public) need
to do more to educate themselves about fair domain values. Most of
us will tend to think that buyers are the ignorant ones, but I can
think of at least three instances of domains that most of us would
not give our lunch money for that have standing six-figure offers on
them! If only the sellers would come to their senses—this still
happens a lot, even today. If domain sellers start to feel that this
is “Bubble Part II”, this tendency could get worse.”

Bentley
said “to help counteract this, we try to give both parties as much
information about a domain as possible. Bring visitor numbers, CPC
(cost per click), CTR (click through rate), origin of
traffic, etc. all out in the open and it becomes easier to find
a “fair value” price.” Bentley added, “another risk to
increasing prices would be a collapse in pay per click prices. Many
people are remarkably good at accurately estimating how much they
will earn from a given domain name via domain parking. If the CPC
falls, prices would follow pretty quickly (so don’t go clicking on
your parked domains and send CPCs down!). Of course, if it rises,
prices will too.”

Though
no one can predict the future for certain, Bentley likes what he is
seeing at his company today. “Sedo has the largest database of any
domain marketplace—over 1 million domain names. Sales have
been great and February was our first $1 million dollar month—we
sold over a million dollars of domain names in just 29 days. Just
two years ago, our monthly volume of domain sales processed was
measured in the tens of thousands.” Bentley also said, “the
number of visitors to our network of sites has increased 100 fold,
we’ve become a community of over 150,000 domain professionals
(members) and that figure increases by around 7,500 new members each
month!”

Bentley
claims that “compared to the erstwhile “giants”, we now have
the highest traffic (compare the Alexa numbers of their
single sites to the numbers of our multiple sites), the largest
database, the most international presence, the best parking program
and the largest number of entries on DNJournal.com’sTop
Sales list - my personal favorite measure of
success!"

To sum it all
up, Bentley declared “We’re on a roll! The domain market
is recovering, Sedo is emerging as a global leader in both domain
selling and domain parking and we have a very solid foundation for
future growth.” All we can add is if what they have poured over
the past four years is just the foundation this is going to
be one heck of a house!

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Editor’s
Note: For those who would like to comment on this story,
we invite you to make use of our Letters to the Editor
feature (write to editor@dnjournal.com).